Split verdict on rate action

8 economists out of 15 expect pause, rest see 25 bps rate cut

- CHRISTINA TITUS, KSHIPRA PETKAR & MAHESH NAYAK

ECONOMISTS ARE SHARPLY divided on whether the Monetary Policy Committee (MPC), slated to meet on December 5, will decide to lower the policy repo rate from the current 5.5%.

Of the 15 economists polled, eight are not expecting a cut while the others anticipate a reduction of 25 basis points (bps). Interestingly, two economists changed their views from a cut to a pause after the GDP growth for the September quarter came in at a strongerthan-expected 8.2%.

Economists leaning towards a pause cite strong GDP data, external pressures, and the need to preserve policy space. Those calling for a cut argue that subdued inflation, running below the Reserve Bank of India's forecasts, and slowing nominal growth justify a cut.

The RBI's communication on the stance and liquidity management is keenly awaited as is the central bank's communication on Open Market Operations.

Madan Sabnavis, chief economist at Bank of Baroda, sees no reason for a rate cut. “We need to preserve a 1.5% real rate futuristically. If inflation next year is above 4%, which it will be, we can't lower it now and increase it later. Besides, 25 bps will make no difference to investment decisions," Sabnavis opined.

Gaura Sengupta, chief economist at IDFC First Bank, cited the limited policy space as reason for the pause.

"It's better to utilise it when downside risks to growth materialise," Sengupta added. She pointed to high-frequency indicators showing a broad-based recovery in rural demand in Q2FY26 and urban consumption picking up in Q3FY26 following GST cuts.